C L D 2002 472 (PLP)

For and on behalf of the President of Pakistan Chief Manager, State Bank of Pakistan. Governor, State Bank of Pakistan. Public Debt Office." The form of FCBC attached with 1992. Rules is as follows:‑‑ Government of Pakistan. Deutsch Mark . Deutsch Mark Pound Sterling . Pound Sterling Japanese Yen . Japanese Yen Five Years Foreign Currency Bearer Certificate No.0000000000 . No.000000000000 The bearer of this Certificate is entitled to receive payment of U.S. Dollar. Deutsch Mark Pound Sterling Japanese Yen____________________ five years (face value in words) after date of issue and the profit ________% per annum payable half yearly in accordance with the Five Years Foreign Currency Bearer Certificates Rules, 1992 on presentation of the Office of Issue. By Order of the President of Pakistan Date of issue _____________ Date & Stamp of Office of Issue Governor State Bank of Pakistan Transferable by deliver No._________ ______ No.____________ Rate______________ Rate____________ Amount in F. Cy._____ Amount in F.Cy.___ Pak. Rs. ___________ Pak. Rs._________ Date of payment_____ Date of payment____"

11. To supplement his submissions, Mr. Abid Hassan Minto, ASC, further contended that as is manifest from 1992 Rules published in official Gazette through Notification that the same are expressly applicable to Five Years U.S. Dollar, Deutsch Mark, Pound Sterling and Japanese Yen and to no other. These certificates, therefore, in no manner have any nexus with the bearer bond as defined in section 2(2)(a)(iii) as such was a Government security falling under clause (iv) of the said section.

12. We have gone through Public Debt Rules, 1946 and the provisions of the Act and the rules framed in 1992 under which 1B FCBC in question were issued to the respondent and find that the contentions of Mr. Abid Hassan Minto, Advocate Supreme Court, have considerable force that these certificates were not and could not be construed to be a bearer bond falling under section 2(2)(a)(iii) of the Act, therefore, reliance upon the. definition of bond as given in Black's Law Dictionary, Stamp Act and other Statutes and the dictionary meaning of the B expression "bond" was not proper. These FCBC thus are Government securities/a category apart from those securities falling under section 2(2)(a)(i)(ii)(iii) of the Act, as such, it can safely be held that it fell within the ambit of section 2(2)(a)(iii) of the Act.

13. The arguments of Mr. Abid Hassan Minto, ASC, and the above findings find support from the arguments of Mr. Hamid Khan, learned counsel for the respondent who brought to our notice that previously, in the year 1985, securities of similar nature were floated by the Federal Government by promulgating Foreign Exchange Bearer Certificates Rules, 1985 notified on 6 6‑1985. If foreign exchange relatable Government securities were already covered by securities in the form of bearer bond provided in section 2(2)(a)(iii) of the Act, there was no need for framing special rules for floating Government securities relating to foreign exchange.

14. After having held that certificates in question fall in the category of Government security as defined in section 2(2)(a)(iv) of the Act, the next question arises as to what are the rights of the holder of the same in case they were destroyed, mutilated or burnt.

15. Section 11 (1) and (1A) of the Act which are relevant are reproduced below:‑‑ "

11. Issue of duplicate securities and of new securities on conversion, consolidation, sub‑division or renewal.‑‑ (1) If the person entitled to a Government security applies [*not being security in a form notified in pursuance of paragraph (iv) of sub‑clause (a) of clause (2) of section 2) to the Bank alleging that the security has been lost, stolen or destroyed, or has been defaced or mutilated, the Bank may, on proof to its satisfaction of the loss, theft, destruction, defacement or mutilation of the security, subject to such conditions and on payment of such fees as may be prescribed, order the issue of a duplicate security payable to the applicant. * ["(1‑A) If a Government Security In any of the forms notified in pursuance of paragraph (iv) of sub‑clause (a) of clause (2) * of section 2 has been defaced or mutilated, the holder thereof may, in such manner, and subject to such conditions and on payment of such fees, if any, as may be notified by Government, apply for the issue of a duplicate security, or for the refund of its value]: [Provided that, where such Government security is in the form of Prize Bond, the holder thereof may apply only for the refund of its value.]"

16. A perusal of these provisions reveals that section 11(1) is applicable to all Government securities other than those notified under section 2(2)(a)(iv) of the Act. The FCBC being a Government security notified in pursuance of clause (iv), therefore, was governed in the matter of issuance of duplicate certificate by section 11(1‑A).

17. A comparison of these two provisions shows that a person entitled to a Government security falling under section 2(2)(a)(i) to (iii) has a right to apply for issuance of duplicate certificate if it is lost, stolen or destroyed or defaced or mutilated whereas in the case of a security notified under clause (iv) of the said section, duplicate certificate could be issued only in case the same had been defaced or mutilated. Prima facie, this provision does not contain any provision for issuance of duplicate in case such a security is lost, stolen or destroyed. Rule 11 of Five Years Foreign Currency Bearer Certificates Rules, 1992 reads as under:‑‑ "

11. No claim of any nature will be entertained in case of any certificate is lost, stolen, destroyed, mutilated or burnt."

18. The rule shows that no claim whatsoever of any nature will be entertained in case of any of such certificate, is lost, destroyed, mutilated or burnt.

19. We have seen that section 11(1‑A) of the Act provides a right to holder of such a certificate to have issued a duplicate one in case the original had been defaced or mutilated, therefore, this rule to the extent that no claim shall be entertained even in case the same had been defaced or mutilated is ultra vires of the said provisions of the Act, therefore, could neither be pressed into service nor enforced.

20. Having found that rule 11 is ultra vires of the provisions of section 11(1‑A) of the Act to the extent of defaced or mutilated certificates in the matter of issuance of duplicate thereof, the next question which falls for consideration is whether these certificates can be held to have been mutilated or defaced. The case of the respondent was that the certificates in question were affected by termite and were reduced into small pieces. Learned counsel for the appellant when questioned admitted that those small pieces have been provided to the bank by the respondent. The term "defaced" or "mutilated" has not been defined in the Act itself but instead of relying upon dictionary meaning of these terms, we have to explore all possible avenues to find out whether any meanings have been assigned to them in the 1946 Rules framed under the said Act in respect of Government securities, for section 11(1) in relation to other securities covers the cases of defacement or mutilation also, therefore, it would be safe rather legally justified to involve the said definition or meaning assigned to these expressions in the rules.

20. Rule 2(7) of the Public Debt Rules. 1946 defines mutilated security as under:‑‑ "(7) "Mutilated Security" means a security which has been destroyed, torn or damaged in material parts thereof and the material parts of a security are those where‑‑ (i) the number, loan to which it belongs and the face value of the security or payments of interest are recorded, or (ii) the endorsement or the name of the payee is written or the transfer is executed, or (iii) the renewal receipt is supplied."

21. Sub‑rules (8) and (9) of this rule define the term "lost security" and "defaced security" as under:‑‑ "(8) "Lost security" means a security which has actually been lost and shall not mean a security which is in possession of some person adversely to the claimant. (9) "Defaced security" means a security which has been made illegible or rendered undecipherable in material parts."

22. From a bare reading of these definitions of mutilated security, lost security and defaced security given in these rules, it is clear that in case of mutilated security and defaced security, the document itself is available in some form but the same has been destroyed or damaged to such an extent that the material parts if have been materially damaged whereas in the case of lost security, the original document itself is not available with the holder.

23. Considering the case of the respondent on the touchstone of this definition of mutilated security and defaced security, we have no hesitation in our mind to hold that the respondent's case was a case of mutilated security, for the documents themselves are available but in torn pieces having been affected by termite where material parts are neither visible nor decipherable. It was a case which squarely falls within the ambit of section 11(1‑A) of the Act, therefore, the respondent could not be denied his right to obtain duplicate certificates.

24. Mr. Abid Hassan Minto, Advocate Supreme Court, when faced with this situation tried to overcome it by arguing that rules for issuance of duplicate certificates for Government securities covered by section 2(2)(a)(iv) of the Act have not been framed by the Federal Government, as such, the State Bank of Pakistan which was a subordinate Organization of the Federal Government could not by its own issue duplicate thereof in the absence of such rules, for the existing rule 11 does not permit the State Bank to issue duplicate certificate in any circumstance.

25. Though the findings recorded above that the present one is a case of mutilated and defaced security and the respondent has been found to be entitled to get the duplicate of the certificates under section 11(1‑A) of the Act and rule 11 of 1992 Rules barring the issuance of duplicate thereof are ultra vires of the Act is sufficient to grant relief to the respondent but in order to avoid any impression that by holding so, we may not be taken to have held thus in case 'such a certificate is lost, burnt or destroyed, the holder is not entitled to get duplicate certificates, we have examined the case further. Mr. Hamid Khan, learned counsel for the respondent has brought to our notice that in order to encourage investments and savings through foreign exchange in the country so as to improve upon the economy of the country, the Federal Government promulgated Ordinance No.XXXIX of 1991 (Protection of Economic Reforms Ordinance, 1991 and Ordinance No.III of 1992 (Protection of Economic Reforms Ordinance, 1992 and thereafter Act XII of 1992 (Protection of Economic Reforms Act, 1992). He has referred to various provisions of Act No.XII of 1992 in order to demonstrate that the savings and investments made by the citizens of Pakistan in the form of foreign exchange was given blanket protection as to its security and payment to the investor.

26. From a bare perusal of definition of "Economic Reforms" as given in section 2(1) (b) of Act XII of 1992 and in the two preceding Ordinances appears that any investment or saving made in foreign exchange after seventh day of November, 1990 was covered by the said Act. It would be advantageous to reproduce section 2(1)(b) of the Act which is as under:‑‑ "(b) 'economic reforms' means economic policies and programmes, laws and regulations announced, promulgated or implemented by the Government on and after the seventh day of November, 1990, relating to privatisation of public sector enterprises, and nationalized banks, promotion of savings and investments, introduction of fiscal incentives for industrialization and deregulation of investment, banking, finance, exchange and payments systems, holding and transfer of currencies." Section 3 of the Act provides that the provisions of this Act shall have effect notwithstanding anything contained in the Foreign Exchange Regulation Act, 1947 (VII of 1947), the Customs Act, 1969 (IV of 1969), the Income Tax Ordinance, 1979 (XXXI of 1979), or any other law for the time being in force. Section 4 of the Act allows freedom to bring, hold, sell, transfer and take out foreign exchange within or out of Pakistan in any form. Section 10 of the Act reads as under:‑‑ "

10. Protection of financial obligation.‑‑‑All financial obligations incurred including those under any instrument, or any financial and contractual commitment made by or on behalf of the Government shall continue to remain in force, and shall not be altered to the disadvantage of the beneficiaries." The cumulative effect or reading of different sections of this Act and the preceding two Ordinances which are similar in nature is that these laws have overriding effect and the savings and investments made in the form of foreign exchange in any manner in Pakistan have been given blanket protection and solemn commitment given by the Federal Government as embodied in different provisions of these laws that any such investment or saving made in the form of foreign exchange is saved notwithstanding anything contained in any other law to the contrary and such a saving and investment could not be altered to the disadvantage of the beneficiaries. Rules regarding FCBC in question were promulgated through Notification on seventh of March, 1992. Mr. Abid Hassan Minto, learned counsel for the appellant frankly conceded that they were promulgated to give effect to the provisions of the above laws to facilitate making of the investments and savings in the form of foreign exchange in Pakistan. As has already been seen, provisions of these laws have overriding effect, therefore, it can safely be held that section 11(1‑A) of the Act providing that duplicate certificates could be issued only in case, they are mutilated or defaced and not if they are lost, burnt or destroyed, is calculated to negate the protection given by Economic Reforms Act, 1992 to investments and savings made in the foreign exchange, for it deprives altogether the makers of their investments and savings. This being so, rule 11 of Five Years Foreign Currency Bearer Certificate Rules, 1992 and section 11(1‑A) of the Act are in conflict with the provisions of Economic Reforms Act, 1992 and the provisions of the two preceding Ordinances, therefore, the latter shall prevail and the holder of such a certificate even in case the original is lost, burnt or destroyed is entitled to get duplicate certificate to make use of such investments and savings. This interpretation is also in consonance with the fundamental right enshrined in Article 24(1) of the Constitution which provides that no person shall be deprived of his property and the Constitution also provides that in case, the property of a person is acquired compulsorily, provision shall be made for payment of compensation thereof. Mr. Abid Hassan Minto, learned counsel for the appellants then maintained that in view of above findings, the holder of FCBC is entitled to get duplicate thereof in case it is mutilated, defaced, burnt or destroyed but the Government has not framed any rules providing procedure for issuance of duplicate, for under rule 11 of 1992 Rules, no claim for issuance of duplicate certificate was entertainable. He has also maintained that under the Act, it is the Federal Government which is empowered to frame the rules and not the State Bank of Pakistan, as such, duplicate certificates cannot be issued till such time rules are framed for which State Bank cannot be blamed. The argument though appears to be ingenuous but not tenable on close scrutiny. Since the investments or savings made by a citizen through FCBC has been held to have been protected and saved under the Protection of Economic Reforms Act, 1992 and holder of such certificate is entitled to use and derive benefit of such investments and savings, therefore, till such time rules are framed regarding issuance of duplicate of such certificates, Public Debt Rules, 1946' framed under the Act relating to other securities in case they are mutilated, defaced, lost or burnt can safely be invoked and followed. We find that rule 14 of the said Rules which dealt with issuance of duplicate bearer bond lays down elaborate procedure to ensure that no false claim is entertained, should be followed.

32. Mr. Abid Hassan Minto, Advocate Supreme Court, when asked frankly stated on instructions that elaborate inquiry held by the State Bank of Pakistan establishes that the certificates were issued in the name of the respondent and particulars of the same are available in the record maintained by the concerned bank and that the same had not been encashed by any person. He has also admitted that broken pieces of the damaged original certificates have been provided to the bank. Necessary Notifications in the Official Gazette have also been issued both in the Province and Federal Government copies of which have been placed on the record as required under the rules governing issuance of duplicate thereof and no claim whatsoever has uptil today been filed by any other person. This being so, there is no hindrance in the way of issuance of duplicate certificate to the respondent holder of such certificates to secure the amount invested by him through the said certificates and the profit which they had earned during all this period.

33. Lastly, Mr. Abid Hassan Minto. Advocate Supreme Court, prayed for expungement of the remarks made by the Division Bench of the High Court in the impugned judgment condemning and criticizing the conduct of the State Bank of adopting an attitude of declining to issue duplicate certificate for the reason that the State Bank bonafidely acted under the rules framed by the Federal Government and not of its own.

34. We have gone through the findings of the Division. Bench and find that no derogatory remarks of condemnation have been made. We may, however, observe that the act of the State Bank of Pakistan of declining to issue duplicate certificate was based on rule 11 of 1992 Rules framed by the Federal Government, therefore, bad faith or any ulterior motive cannot be attributed to it.

35. For the foregoing reasons, the appeal has no merits which is accordingly dismissed with no order as to costs. S.A.K./M.A.K./S‑149/S Appeal dismissed.